Govt extends R200b COVID-19 loan guarantee scheme by 3 months

Image credit: Twitter/South African Government

The National Treasury, South African Reserve Bank (SARB) and Banking Association of SA (BASA) have decided to extend the R200 billion COVID-19 loan guarantee scheme by three months.

The three entities introduced the scheme in May last year as part of the government’s R500 billion economic and social relief package.

It was aimed at helping small businesses weather the impact of the COVID-19 pandemic. However, there was poor uptake of the loans and the scheme was scheduled to end on 11 April 2021.

Scheme extended to July

In a joint statement on Monday, Treasury, SARB and BASA said after further consultations, they had agreed to extend the deadline by three months to 11 July 2021.

“The guarantee scheme will continue to service all loans advanced up to the extended date, for up to five years. The further extension of three months will enable an orderly winding down of the scheme and allow those businesses who have applications already lodged to be assessed,” they added.

Of the possible R200 billion the government had committed to guarantee, banks had approved just R18.16 billion in loans as of 27 March 2021.

Treasury, SARB and BASA acknowledged that the scheme has not been “as effective as originally envisaged,” partly because businesses have been reluctant to take on more debt amid economic uncertainty.

Other forms of support

“In addition to this guaranteed loan scheme, banks have also provided significantly more support to their small business customers via their own balance sheets, totalling at least R33 billion in payment relief, between April and November 2020,” the three institutions sad.

“Such support reduced demand for the [scheme]. Banks have also restructured loans and credit facilities worth billions more to their clients and corporate customers in financial distress.

“The Financial Sector Conduct Authority (FSCA) has also provided further support to businesses and individuals by adjusting regulations to support insurance premium relief for policyholders, allowing them to claim while minimising disruptions to the expected income of intermediaries.”

In March, President Cyril Ramaphosa blamed banks for not doing enough to make the scheme a success.

He said, “The disappointment, for me, has been in how our financial sector has managed the COVID-19 guarantee fund that we put up, which was guaranteed by government.

“We put up R200 billion and we said, ‘Assist the private sector and let’s protect the jobs so that companies are able to operate through COVID-19 and, through that, we should restructure our economy and bring more black people who have been prevented from operating in their own economy.’ And that has not really happened.”

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